Donors' shock therapy: From system loss to systematic loss

The annual loss of Tk 400 crore (US$ 68 million) incurred by the Power Development Board (PDB) is quite disturbing. After all, such financial disaster is not due to the historical ailments like power theft or mismanagement. Rather the donor-driven power sector reform has been "systematically ruining" the PDB. The Daily Star broke this news last Tuesday.

This report says it costs PDB Tk.1.99 to produce each unit of power. Experts may debate on the reality of this figure. But the government has been penalising this state-owned enterprise to outsource by paying as high as 120 per cent extra cost. PDB pays Khulna Power Company Tk.4.33, NEPC Tk.3.93, and Westmont Tk.2.96 for each unit of power.

Whereas PDB sells power to Dhaka Electric Supply Authority (DESA) at Tk.1.96 per unit. Why such a garage sale? Because in the name of reforms, the World Bank forced to dismantle PDB and created DESA. Therefore, the books of DESA must not be red until further "reforms" are accomplished.

The Asian Development Bank (ADB) sponsored Rural Power Company Limited (RPCL) to generate power for Rural Electrification Board (REB). But PDB has been compelled to purchase power from RPCL at Tk.4.67 and sell it back to REB at Tk.1.84, sustaining 155 per cent loss in every unit!

Quite a way to cook-up the multi-lateral donors' successful reform stories. Interestingly these donors preach austerity measures by scrapping various socio-economic subsidies. Dhaka Electricity Supply Company (DESCO) and Power Grid Company Bangladesh (PGCB) were also created by the donors.

The donors termed PDB as a corrupt, inefficient and losing concern causing system loss, to justify the birth of DESA, DESCO and PGCB. Evidently it is no longer the system loss but the systematic loss of blood from PDB's ruptured vein of internal power tariff structure, due to the donors' lethal shock therapy.

This is a pathological ailment of the multi-lateral donors. Greg Palast reports for BBC and the Guardian newspaper. Last March the Harper's Magazine published his article: 'Resolved to ruin: the World Bank/IMF takeover, in four easy steps.'

Greg exposed the systematic destruction of Argentina's economy by the World Bank and IMF. He labelled their loan agreements as de facto legislation for the developing and underdeveloped countries. "Although couched as loan conditions or as helpful development advice, these reports more closely resemble the minutes of a financial coup d'etat," Greg commented.

Ecuador received World Bank loan only after it permitted the construction of a controversial gas pipeline over the Andes that had long been sought by British Petroleum. In Sierra Leone, one of the "performance criteria" imposed by the IMF in 2001 was that the nation stops requiring import licences on foreign-made cigarettes. It was a joyride for Marlboro.

Greg said, "It is perhaps not a coincidence, then, that the 'triggers' of these loans so often are friendly to the interests of Western corporations." Such allegations were confirmed with graphical presentations in the 11th International Anti-Corruption Conference in Seoul last month. Nearly 900 participants from more than 100 countries, including Dr. Kamal Hossain and others from Bangladesh, attended that event.

Brian Cooksey presented his case studies titled, "Aid and corruption: A worm's-eye view of donor policies and practices." He presented inconclusive evidences on donors' connivance with the vested groups in sectoral reforms.

The Bank-funded $115 million urban transportation project in Kenya involved grand corruption. Long-term World Bank employee Gautam Sengupta pleaded guilty to having received $127,000 in kickbacks and had helped bribing $50,000 to the concerned Kenyan government official of this project.

In 2001, British Overseas Development Secretary Clare Short (Lately resigned protesting the Iraq scandal) objected the Tanzanian government purchasing $40 million radar from British Aerospace, just after Tanzania obtained pledges of $3 billion in debt relief.

This radar was reportedly overpriced and inappropriate for Tanzanian needs. It was temporarily halted but Tony Blair supported the deal and resumed British aid. Britain subsequently increased its aid commitments to Tanzania by 50 per cent. This case study concludes, "Aid agencies tolerate, and in some cases help underwrite, acts of grand corruption."

Cooksey presented another case study of donor's corruption in power purchase deal. The Bujagali Dam is a 250 megawatt independent power project in Uganda. To finance the dam, US power giant AES will borrow $225 million of the $500 million project costs from the IFC, the World Bank's private lending arm, and $55 million from the African Development Bank.

Size of this project was questioned, as it would virtually double the country's generating capacity. The national grid does not cover 75 per cent of the population and the electricity board's problem was not lack of power but lack of distribution capacity. Moreover 93 per cent Ugandans cannot afford the unsubsidised power tariff of this project.

Ugandan Members of Parliament questioned the prohibitive price of electricity in the power purchase agreement with AES. According to a 1999 joint assessment by UNDP and World Bank, the power station would be of little benefit to Ugandans.

In April 1999, Uganda's energy minister Richard Kaijuka resigned after being accused of accepting bribes. He allegedly pushed for the signing of the power purchase agreement in which Uganda would lose huge sums of money to AES. The allegations were not only ignored by the World Bank, but Kaijuka was rewarded with the job of alternate director to the board of the World Bank.

Preliminary work on the dam was stopped in July 2002 due to renewed allegations of corruption. In January 2003, Kaijuka resigned from World Bank, over an alleged $10,000 bribe which he was paid in 1999 by Nor-Icil Ltd, the British subsidiary of Veidekke, the main contractor for the dam.

There was no competitive tendering procedure for the dam construction. But Uganda's President was blindly obsessed with this project. There has been government intimidation of those who speak out against the project in the dam region. At one point, a US government official said that failure to approve the scheme would damage the US-Uganda relations.

Sounds familiar? Are not we equally susceptible to such threats? Diplomatic guns were promptly pointed on the head of US-Bangladesh relation and the fate of investments was threatened when deals were not closed with SSA and Tyco.

Nevertheless, would it be impractical to suspect that someone from the donors has not been benefited out of our power purchase or other deals? Can the donors assure us that no Gautam Sengupta or Richard Kaijuka exists in Bangladesh?

We don't need their answer. The University Press Limited is publishing a book. It exposes that multilateral donors are not at all Robin Hood. We look forward to the book which is likely to provide interesting reading.

The writer is telecom analyst